Highlights (third-quarter 2023 versus third-quarter 2022,
unless otherwise noted):
- Reported revenues of $4.9 billion, up 12 percent; organic
revenues* up 9 percent
- GAAP operating margin up 80 bps; adjusted operating margin*
up 130 bps
- Adjusted EBITDA margin* of 19.5 percent, up 100 bps
- GAAP continuing EPS of $2.74; adjusted continuing EPS* of
$2.79, up 23 percent
- Organic bookings* up 8 percent, led by Americas Commercial
HVAC, up 14 percent
- $6.9 billion backlog, up 7 percent, and 2.5 times historical
norms
*This news release contains non-GAAP financial measures.
Definitions of the non-GAAP financial measures can be found in the
footnotes of this news release. See attached tables for additional
details and reconciliations.
Trane Technologies plc (NYSE:TT), a global climate innovator,
today reported diluted earnings per share (EPS) from continuing
operations of $2.74 for the third quarter of 2023. Adjusted
continuing EPS was $2.79, up 23 percent.
Third-Quarter 2023 Results
Financial Comparisons - Third-Quarter Continuing
Operations
$, millions except EPS
Q3 2023
Q3 2022
Y-O-Y Change
Organic Y-O-Y Change
Bookings
$4,946
$4,493
10%
8%
Net Revenues
$4,883
$4,372
12%
9%
GAAP Operating Income
$864
$740
17%
GAAP Operating Margin
17.7%
16.9%
80 bps
Adjusted Operating Income*
$879
$729
21%
Adjusted Operating Margin*
18.0%
16.7%
130 bps
Adjusted EBITDA*
$954
$809
18%
Adjusted EBITDA Margin*
19.5%
18.5%
100 bps
GAAP Continuing EPS
$2.74
$2.38
15%
Adjusted Continuing EPS
$2.79
$2.27
23%
Pre-Tax Non-GAAP Adjustments,
net**
$15.0
$4.3
$10.7
**For details see table 2 of the news
release.
“Focused execution of our purpose-driven strategy continues to
deliver industry-leading results and enable high levels of business
reinvestment for future growth,” said Dave Regnery, chair and CEO,
Trane Technologies. “With bookings at an all-time high, we continue
to see robust customer demand for our sustainable products and
services, with particular strength across our commercial HVAC
businesses globally.
“Our strong operating performance and robust backlog give us
confidence in once again raising our full-year revenue and adjusted
EPS guidance and provide visibility to solid growth in 2024 as
well. With our leading innovation, resilient portfolio and talented
team, Trane Technologies is uniquely positioned to deliver superior
growth and differentiated shareholder returns over the long
term.”
Highlights from the Third Quarter of 2023 (all comparisons
against third-quarter 2022 unless otherwise noted)
- Delivered strong third-quarter revenue, operating income,
EBITDA and EPS growth.
- Strong bookings of $4.9 billion.
- Organic bookings were up 8 percent, led by Americas Commercial
HVAC.
- Enterprise reported revenues were up 12 percent, including 3
percentage points related to acquisitions. Organic revenues were up
9 percent.
- GAAP operating margin was up 80 basis points, adjusted
operating margin was up 130 basis points and adjusted EBITDA margin
was up 100 basis points.
- Strong volume growth, positive price realization, and
productivity more than offset inflation. The Company also continued
high levels of business reinvestment.
- Enterprise exited the third quarter of 2023 with backlog at 2.5
times historical norms.
Third-Quarter Business Review (all comparisons against
third-quarter 2022 unless otherwise noted)
Americas Segment: innovates for customers in the North
America and Latin America regions. The Americas segment encompasses
commercial heating, cooling and ventilation systems, building
controls, and energy services and solutions; residential heating
and cooling; and transport refrigeration systems and solutions.
$, millions
Q3 2023
Q3 2022
Y-O-Y Change
Organic Y-O-Y Change
Bookings
$3,960.3
$3,680.5
8%
7%
Net Revenues
$3,888.0
$3,481.4
12%
11%
GAAP Operating Income
$748.3
$652.4
15%
GAAP Operating Margin
19.2%
18.7%
50 bps
Adjusted Operating Income
$750.6
$630.0
19%
Adjusted Operating Margin
19.3%
18.1%
120 bps
Adjusted EBITDA
$809.0
$697.7
16%
Adjusted EBITDA Margin
20.8%
20.0%
80 bps
- Strong bookings of $4.0 billion.
- Organic bookings were up 7 percent, led by Commercial HVAC,
which was up 14 percent year-over-year, and up approximately 65
percent on a 3-year stack.
- Reported revenues were up 12 percent, including 1 percentage
point related to acquisitions. Organic revenues were up 11
percent.
- Americas segment exited the third quarter of 2023 with backlog
at approximately 3 times historical norms.
- GAAP operating margin was up 50 basis points, adjusted
operating margin was up 120 basis points and adjusted EBITDA margin
was up 80 basis points.
- Strong volume growth, positive price realization, and
productivity more than offset inflation. The Company also continued
high levels of business reinvestment.
Europe, Middle East and Africa (EMEA) Segment: innovates
for customers in the Europe, Middle East and Africa region. The
EMEA segment encompasses heating, cooling and ventilation systems,
services and solutions for commercial buildings and transport
refrigeration systems and solutions.
$, millions
Q3 2023
Q3 2022
Y-O-Y Change
Organic Y-O-Y Change
Bookings
$585.6
$453.6
29%
12%
Net Revenues
$618.6
$513.1
21%
3%
GAAP Operating Income
$110.1
$80.1
37%
GAAP Operating Margin
17.8%
15.6%
220 bps
Adjusted Operating Income
$118.4
$86.3
37%
Adjusted Operating Margin
19.1%
16.8%
230 bps
Adjusted EBITDA
$130.4
$94.7
38%
Adjusted EBITDA Margin
21.1%
18.5%
260 bps
- Reported bookings were up 29 percent; organic bookings were up
12 percent.
- Reported revenues were up 21 percent, including approximately
12 percentage points related to acquisitions and approximately 6
percentage points of positive foreign exchange impact. Organic
revenues were up 3 percent, led by Commercial HVAC, up mid-single
digits and up more than 30 percent on a 2-year stack.
- EMEA segment exited the third quarter of 2023 with backlog
approximately 60 percent more than historical norms.
- GAAP operating margin was up 220 basis points, adjusted
operating margin was up 230 basis points and adjusted EBITDA margin
was up 260 basis points.
- Strong positive price realization and productivity more than
offset inflation. The Company also continued high levels of
business reinvestment.
Asia Pacific Segment: innovates for customers throughout
the Asia Pacific region. The Asia Pacific segment encompasses
heating, cooling and ventilation systems, services and solutions
for commercial buildings and transport refrigeration systems and
solutions.
$, millions
Q3 2023
Q3 2022
Y-O-Y Change
Organic Y-O-Y Change
Bookings
$400.2
$358.8
12%
12%
Net Revenues
$376.3
$377.4
flat
(1)%
GAAP Operating Income
$82.6
$75.6
9%
GAAP Operating Margin
22.0%
20.0%
200 bps
Adjusted Operating Income
$82.6
$76.1
9%
Adjusted Operating Margin
22.0%
20.2%
180 bps
Adjusted EBITDA
$87.7
$81.8
7%
Adjusted EBITDA Margin
23.3%
21.7%
160 bps
- Reported and organic bookings were both up 12 percent.
- Reported revenues were flat including approximately 4
percentage points related to acquisitions offset by approximately 3
percentage points of negative foreign exchange impact. Organic
revenues were down 1 percent, against a tough prior year growth
comp of 28 percent.
- Asia Pacific segment exited the third quarter of 2023 with
backlog approximately 70 percent more than historical norms.
- GAAP operating margin was up 200 basis points, adjusted
operating margin was up 180 basis points and adjusted EBITDA margin
was up 160 basis points.
- Strong positive price realization and productivity more than
offset inflation. The Company also continued high levels of
business reinvestment.
Balance Sheet and Cash Flow
$, millions
Q3 2023
Q3 2022
Y-O-Y Change
Cash From Continuing Operating
Activities Y-T-D
$1,483
$933
$550
Free Cash Flow Y-T-D*
$1,288
$891
$397
Working Capital/Revenue*
4.8%
4.1%
70 bps increase
Cash Balance September 30
$960
$1,080
($120)
Debt Balance September 30
$4,825
$4,837
($12)
- Through September 30, 2023, cash flow from continuing operating
activities was $1.5 billion and free cash flow was $1.3
billion.
- During the third quarter, the Company deployed approximately
$172 million for dividends. Additionally, in the third quarter and
October, the Company deployed $250 million for share repurchases.
Year-to-date through October, the Company has deployed
approximately $2 billion, including $513 million for dividends and
$550 million for share repurchases, and has committed to deploy
approximately $900 million for M&A.
- The Company expects to continue to pay a competitive and
growing dividend and to deploy 100 percent of excess cash to
shareholders over time.
Raising Full-Year 2023 Revenue and EPS Guidance
- The Company expects full-year reported revenue growth of
approximately 10 percent to 11 percent; organic revenue growth of
approximately 8 percent to 9 percent versus full-year 2022.
- The Company expects GAAP continuing EPS for full-year 2023 of
approximately $8.75. The Company expects adjusted continuing EPS
for full-year 2023 of approximately $9.00.
- Additional information regarding the Company's 2023 guidance is
included in the Company's earnings presentation found at
www.tranetechnologies.com in the Investor Relations section.
This news release includes “forward-looking" statements within
the meaning of securities laws, which are statements that are not
historical facts, including statements that relate to our future
financial performance and targets, including revenue, EPS, and
earnings; our business operations; demand for our products and
services, including bookings and backlog; capital deployment,
including the amount and timing of our dividends, our share
repurchase program, anticipated capital commitments for M&A
activity, and our capital allocation strategy; our available
liquidity; our anticipated revenue growth, and the performance of
the markets in which we operate.
These forward-looking statements are based on our current
expectations and are subject to risks and uncertainties, which may
cause actual results to differ materially from our current
expectations. Such factors include, but are not limited to, the
impact of the global COVID-19 pandemic or future health care
emergencies on our business, our suppliers and our customers;
global economic conditions, including recessions and economic
downturns, inflation, volatility in interest rates and foreign
exchange; changing energy prices; the Russia-Ukraine conflict;
financial institution disruptions; climate change and our
sustainability strategies and goals; commodity shortages; supply
chain constraints and price increases; government regulation;
restructurings activity and cost savings associated with such
activity; secular trends toward decarbonization, energy efficiency
and internal air quality, the outcome of any litigation, including
the risks and uncertainties associated with the Chapter 11
proceedings for our deconsolidated subsidiaries Aldrich Pump LLC
and Murray Boiler LLC; cybersecurity risks; and tax audits and tax
law changes and interpretations. Additional factors that could
cause such differences can be found in our Form 10-K for the year
ended December 31, 2022, as well as our subsequent reports on Form
10-Q and other SEC filings. New risks and uncertainties arise from
time to time, and it is impossible for us to predict these events
and how they may affect the Company. We assume no obligation to
update these forward-looking statements.
This news release also includes non-GAAP financial information,
which should be considered supplemental to, not a substitute for,
or superior to, the financial measure calculated in accordance with
GAAP. The definitions of our non-GAAP financial information and
reconciliation to GAAP are attached to this news release.
All amounts reported within the earnings release above related
to net earnings (loss), earnings (loss) from continuing operations,
earnings (loss) from discontinued operations, adjusted EBITDA and
per share amounts are attributed to Trane Technologies' ordinary
shareholders.
Trane Technologies (NYSE:TT) is a global climate innovator.
Through our strategic brands Trane® and Thermo King®, and our
portfolio of environmentally responsible products and services, we
bring efficient and sustainable climate solutions to buildings,
homes and transportation. For more information, visit
tranetechnologies.com.
# # #
11/1/23
(See Accompanying Tables)
- Table 1: Condensed Consolidated Income Statement
- Tables 2 - 5: Reconciliation of GAAP to Non-GAAP
- Table 6: Condensed Consolidated Balance Sheets
- Table 7: Condensed Consolidated Statement of Cash Flows
- Table 8: Balance Sheet Metrics and Free Cash Flow
*Q3 Year-to-date Non-GAAP measures definitions
Adjusted operating income in 2023 is defined as GAAP
operating income adjusted for restructuring costs, transformation
costs, non-cash adjustment for contingent consideration and merger
and acquisition related costs. Adjusted operating income in 2022 is
defined as GAAP operating income adjusted for restructuring costs,
transformation costs, merger and acquisition related costs,
non-cash adjustment for contingent consideration, a settlement
charge for a retired executive and an insurance settlement on a
property claim in Q3 2022. Please refer to the reconciliation of
GAAP to non-GAAP measures on tables 2, 3 and 4 of the news
release.
Adjusted operating margin is defined as the ratio of
adjusted operating income divided by net revenues.
Adjusted earnings from continuing operations attributable to
Trane Technologies plc (Adjusted net earnings) in 2023 is
defined as GAAP earnings from continuing operations attributable to
Trane Technologies plc adjusted for an impairment of equity
investment and the net of tax impacts of restructuring costs,
transformation costs, a non-cash adjustment for contingent
consideration and merger and acquisition related costs. Adjusted
net earnings in 2022 is defined as GAAP earnings from continuing
operations attributable to Trane Technologies plc adjusted for net
of tax impacts of restructuring costs, transformation costs, merger
and acquisition related costs, non-cash adjustment for contingent
consideration, a settlement charge for a retired executive, an
insurance settlement on a property claim in Q3 2022 and a U.S.
discrete non-cash tax adjustment. Please refer to the
reconciliation of GAAP to non-GAAP measures on tables 2 and 3 of
the news release.
Adjusted continuing EPS in 2023 is defined as GAAP
continuing EPS adjusted for an impairment of equity investment and
the net of tax impacts of restructuring costs, transformation
costs, a non-cash adjustment for contingent consideration and
merger and acquisition related costs. Adjusted continuing EPS in
2022 is defined as GAAP continuing EPS adjusted for net of tax
impacts of restructuring costs, transformation costs, merger and
acquisition related costs, a non-cash adjustment for contingent
consideration, a settlement charge for a retired executive, an
insurance settlement on a property claim in Q3 2022, and a U.S.
discrete non-cash tax adjustment. Please refer to the
reconciliation of GAAP to non-GAAP measures on tables 2 and 3 of
the news release.
Adjusted EBITDA in 2023 is defined as adjusted operating
income adjusted for depreciation and amortization expense, other
income / (expense), net and an impairment of equity investment.
Adjusted EBITDA in 2022 is defined as adjusted operating income
adjusted for depreciation and amortization expense, other income /
(expense), net, and a settlement charge for a retired executive.
Please refer to the reconciliation of GAAP to non-GAAP measures on
tables 4 and 5 of the news release.
Adjusted EBITDA margin is defined as the ratio of
adjusted EBITDA divided by net revenues.
Adjusted effective tax rate for 2023 is defined as the
ratio of income tax expense adjusted for the net tax effect of
adjustments for restructuring costs, transformation costs, non-cash
adjustment for contingent consideration, and merger and acquisition
related costs divided by adjusted net earnings. Adjusted effective
tax rate for 2022 is defined as the ratio of income tax expense
adjusted for the net tax effect of adjustments for restructuring
costs, transformation costs, non-cash adjustments for contingent
consideration, settlement charge for a retired executive, an
insurance settlement on a property claim in Q3 2022 , and a U.S.
discrete non-cash adjustment divided by adjusted net earnings. This
measure allows for a direct comparison of the effective tax rate
between periods.
Free cash flow in 2023 is defined as net cash provided by
(used in) continuing operating activities adjusted for capital
expenditures, cash payments for restructuring costs, transformation
costs, and merger and acquisition related costs. Free cash flow in
2022 is defined as net cash provided by (used in) continuing
operating activities adjusted for capital expenditures, cash
payments for restructuring costs, transformation costs, the
continuing operations component of the qualified settlement fund
(QSF) funding, a payout for a retired executive and an insurance
settlement on a property claim in Q3 2022. Please refer to the free
cash flow reconciliation on table 8 of the news release.
Operating leverage is defined as the ratio of the change
in adjusted operating income for the current period (e.g. Q3 2023)
less the prior period (e.g. Q3 2022), divided by the change in net
revenues for the current period less the prior period.
Organic revenue is defined as GAAP net revenues adjusted
for the impact of currency and acquisitions.
Organic bookings is defined as reported orders in the
current period adjusted for the impact of currency and
acquisitions.
Working capital measures a firm’s operating liquidity
position and its overall effectiveness in managing the enterprise's
current accounts.
- Working capital is calculated by adding net accounts and
notes receivables and inventories and subtracting total current
liabilities that exclude short-term debt, dividend payable and
income tax payables.
- Working capital as a percent of revenue is calculated by
dividing the working capital balance (e.g. as of September 30) by
the annualized revenue for the period (e.g. reported revenues for
the three months ended September 30 multiplied by 4 to annualize
for a full year).
The Company reports its financial results in accordance with
generally accepted accounting principles in the United States
(GAAP). The following schedules provide non-GAAP financial
information and a quantitative reconciliation of the difference
between the non-GAAP financial measures and the financial measures
calculated and reported in accordance with GAAP.
The non-GAAP financial measures should be considered
supplemental to, not a substitute for or superior to, financial
measures calculated in accordance with GAAP. They have limitations
in that they do not reflect all of the costs associated with the
operations of our businesses as determined in accordance with GAAP.
In addition, these measures may not be comparable to non-GAAP
financial measures reported by other companies.
We believe the non-GAAP financial information provides important
supplemental information to both management and investors regarding
financial and business trends used in assessing our financial
condition and results of operations.
Non-GAAP financial measures assist investors with analyzing our
business results as well as with predicting future performance. In
addition, these non-GAAP financial measures are also reviewed by
management in order to evaluate the financial performance of each
segment. Presentation of these non-GAAP financial measures helps
investors and management to assess the operating performance of the
Company.
As a result, one should not consider these measures in isolation
or as a substitute for our results reported under GAAP. We
compensate for these limitations by analyzing results on a GAAP
basis as well as a non-GAAP basis, prominently disclosing GAAP
results and providing reconciliations from GAAP results to non-GAAP
results.
Table 1
TRANE TECHNOLOGIES PLC
Condensed Consolidated Income
Statement
(In millions, except per share
amounts)
UNAUDITED
For the quarter
For the nine months
ended September 30,
ended September 30,
2023
2022
2023
2022
Net revenues
$
4,882.9
$
4,371.9
$
13,253.5
$
11,917.9
Cost of goods sold
(3,224.8
)
(2,939.1
)
(8,867.6
)
(8,172.6
)
Selling and administrative expenses
(793.9
)
(693.3
)
(2,179.5
)
(1,907.0
)
Operating income
864.2
739.5
2,206.4
1,838.3
Interest expense
(57.9
)
(55.8
)
(177.1
)
(167.6
)
Other income/(expense), net
(10.0
)
(18.7
)
(76.8
)
(21.0
)
Earnings before income taxes
796.3
665.0
1,952.5
1,649.7
Provision for income taxes
(157.5
)
(104.7
)
(400.2
)
(302.4
)
Earnings from continuing operations
638.8
560.3
1,552.3
1,347.3
Discontinued operations, net of tax
(6.5
)
(7.9
)
(18.2
)
(16.6
)
Net earnings
632.3
552.4
1,534.1
1,330.7
Less: Net earnings from continuing
operations attributable to noncontrolling interests
(6.0
)
(4.5
)
(14.5
)
(13.3
)
Net earnings attributable to Trane
Technologies plc
$
626.3
$
547.9
$
1,519.6
$
1,317.4
Amounts attributable
to Trane Technologies plc ordinary shareholders:
Continuing operations
$
632.8
$
555.8
$
1,537.8
$
1,334.0
Discontinued operations
(6.5
)
(7.9
)
(18.2
)
(16.6
)
Net earnings
$
626.3
$
547.9
$
1,519.6
$
1,317.4
Diluted earnings
(loss) per share attributable to Trane Technologies plc ordinary
shareholders:
Continuing operations
$
2.74
$
2.38
$
6.66
$
5.66
Discontinued operations
(0.02
)
(0.04
)
(0.08
)
(0.07
)
Net earnings
$
2.72
$
2.34
$
6.58
$
5.59
Weighted-average number of common shares
outstanding:
Diluted
230.6
234.0
230.9
235.7
Table 2
TRANE TECHNOLOGIES PLC
Reconciliation of GAAP to
non-GAAP
(In millions, except per share
amounts)
UNAUDITED
For the quarter ended September
30, 2023
For the nine months ended
September 30, 2023
As
As
As
As
Reported
Adjustments
Adjusted
Reported
Adjustments
Adjusted
Net revenues
$
4,882.9
$
—
$
4,882.9
$
13,253.5
$
—
$
13,253.5
Operating income
864.2
15.0
(b,c,d,e)
879.2
2,206.4
(6.3
)
(a,b,c,d,e)
2,200.1
Operating margin
17.7
%
18.0
%
16.6
%
16.6
%
Earnings from continuing operations before
income taxes
796.3
15.0
(b,c,d,e)
811.3
1,952.5
45.9
(a,b,c,d,e,f)
1,998.4
Benefit (Provision) for income taxes
(157.5
)
(3.5
)
(g)
(161.0
)
(400.2
)
2.8
(g)
(397.4
)
Tax rate
19.8
%
19.8
%
20.5
%
19.9
%
Earnings from continuing operations
attributable to Trane Technologies plc
$
632.8
$
11.5
(h)
$
644.3
$
1,537.8
$
48.7
(h)
$
1,586.5
Diluted earnings per
common share
Continuing operations
$
2.74
$
0.05
$
2.79
$
6.66
$
0.21
$
6.87
Weighted-average number of common shares
outstanding:
Diluted
230.6
—
230.6
230.9
—
230.9
Detail of
Adjustments:
(a)
Non-cash adjustment for contingent
consideration (SG&A)
$
—
$
(49.3
)
(b)
Acquisition inventory step-up and backlog
amortization (COGS & SG&A)
8.4
18.5
(c)
Restructuring costs (COGS &
SG&A)
2.3
10.1
(d)
Transformation costs (SG&A)
1.1
3.5
(e)
M&A transaction costs (SG&A)
3.2
10.9
(f)
Impairment of equity investment (OIOE)
—
52.2
(g)
Tax impact of adjustments (a,b,c,d,e)
(3.5
)
2.8
(h)
Impact of adjustments on earnings from
continuing operations attributable to Trane Technologies plc
$
11.5
$
48.7
Pre-tax impact of adjustments on cost of
goods sold
$
2.5
$
14.7
Pre-tax impact of adjustments on selling
& administrative expenses
12.5
(21.0
)
Pre-tax impact of adjustments on operating
income
15.0
(6.3
)
Pre-tax impact of adjustments on other
income/(expense), net
—
52.2
Pre-tax impact of adjustments on earnings
from continuing operations
$
15.0
$
45.9
Table 3
TRANE TECHNOLOGIES PLC
Reconciliation of GAAP to
non-GAAP
(In millions, except per share
amounts)
UNAUDITED
For the quarter ended September
30, 2022
For the nine months ended
September 30, 2022
As
As
As
As
Reported
Adjustments
Adjusted
Reported
Adjustments
Adjusted
Net revenues
$
4,371.9
$
—
$
4,371.9
$
11,917.9
$
—
$
11,917.9
Operating income
739.5
(10.7
)
(a,b,c,d,e,f)
728.8
1,838.3
(17.3
)
(a,b,c,d,e,f)
1,821.0
Operating margin
16.9
%
16.7
%
15.4
%
15.3
%
Earnings from continuing operations before
income taxes
665.0
4.3
(a,b,c,d,e,f)
669.3
1,649.7
(2.3
)
(a,b,c,d,e,f)
1,647.4
Provision for income taxes
(104.7
)
(27.8
)
(g,h)
(132.5
)
(302.4
)
(25.9
)
(g,h)
(328.3
)
Tax rate
15.7
%
19.8
%
18.3
%
19.9
%
Earnings from continuing operations
attributable to Trane Technologies plc
$
555.8
$
(23.5
)
(i)
$
532.3
$
1,334.0
$
(28.2
)
(i)
$
1,305.8
Diluted earnings per
common share
Continuing operations
$
2.38
$
(0.11
)
$
2.27
$
5.66
$
(0.12
)
$
5.54
Weighted-average number of common shares
outstanding:
Diluted
234.0
—
234.0
235.7
—
235.7
Detail of
Adjustments:
(a)
Insurance settlement on a property claim
in Q3 2022 (COGS)
$
(25.0
)
$
(25.0
)
(b)
Non-cash adjustment for contingent
consideration (SG&A)
0.7
(15.4
)
(c)
Restructuring costs (COGS &
SG&A)
10.4
15.8
(d)
Transformation costs (SG&A)
0.6
4.7
(e)
M&A transaction costs (SG&A)
1.8
1.8
(f)
Settlement charge for retired executive
(SG&A & OIOE)
15.8
15.8
(g)
U.S. discrete non-cash tax benefit
(28.9
)
(28.9
)
(h)
Tax impact of adjustments
(a,b,c,d,e,f)
1.1
3.0
(i)
Impact of adjustments on earnings from
continuing operations attributable to Trane Technologies plc
$
(23.5
)
$
(28.2
)
Pre-tax impact of adjustments on cost of
goods sold
$
(22.1
)
$
(17.6
)
Pre-tax impact of adjustments on selling
& administrative expenses
11.4
0.3
Pre-tax impact of adjustments on operating
income
(10.7
)
(17.3
)
Pre-tax impact of adjustments on other
income/(expense), net
15.0
15.0
Pre-tax impact of adjustments on earnings
from continuing operations
$
4.3
$
(2.3
)
Table 4
TRANE TECHNOLOGIES PLC
Reconciliation of GAAP to
non-GAAP
(In millions)
UNAUDITED
For the quarter ended September
30, 2023
For the quarter ended September
30, 2022
As Reported
Margin
As Reported
Margin
Americas
Net revenues
$
3,888.0
$
3,481.4
Segment operating income
$
748.3
19.2
%
$
652.4
18.7
%
Restructuring/Other (a)
2.3
0.1
%
(22.4
)
(0.6
)%
Adjusted operating income *
750.6
19.3
%
630.0
18.1
%
Depreciation and amortization (b)
65.2
1.7
%
68.3
2.0
%
Other income/(expense), net
(6.8
)
(0.2
)%
(0.6
)
(0.1
)%
Adjusted EBITDA *
$
809.0
20.8
%
$
697.7
20.0
%
Europe, Middle
East & Africa
Net revenues
$
618.6
$
513.1
Segment operating income
$
110.1
17.8
%
$
80.1
15.6
%
Restructuring/Other (c)
8.3
1.3
%
6.2
1.2
%
Adjusted operating income
118.4
19.1
%
86.3
16.8
%
Depreciation and amortization (d)
11.2
1.9
%
6.0
1.2
%
Other income/(expense), net
0.8
0.1
%
2.4
0.5
%
Adjusted EBITDA
$
130.4
21.1
%
$
94.7
18.5
%
Asia
Pacific
Net revenues
$
376.3
$
377.4
Segment operating income
$
82.6
22.0
%
$
75.6
20.0
%
Restructuring/Other
—
—
%
0.5
0.2
%
Adjusted operating income
82.6
22.0
%
76.1
20.2
%
Depreciation and amortization
4.4
1.2
%
4.3
1.1
%
Other income/(expense), net
0.7
0.1
%
1.4
0.4
%
Adjusted EBITDA
$
87.7
23.3
%
$
81.8
21.7
%
Corporate
Unallocated corporate expense
$
(76.8
)
$
(68.6
)
Restructuring/Other (e)
4.4
5.0
Adjusted corporate expense
(72.4
)
(63.6
)
Depreciation and amortization
4.4
5.4
Other income/(expense), net (f)
(4.7
)
(6.9
)
Adjusted EBITDA
$
(72.7
)
$
(65.1
)
Total
Company
Net revenues
$
4,882.9
$
4,371.9
Operating income
$
864.2
17.7
%
$
739.5
16.9
%
Restructuring/Other (a,c,e)
15.0
0.3
%
(10.7
)
(0.2
)%
Adjusted operating income
879.2
18.0
%
728.8
16.7
%
Depreciation and amortization(b,d)
85.2
1.7
%
84.0
1.9
%
Other income/(expense), net (f)
(10.0
)
(0.2
)%
(3.7
)
(0.1
)%
Adjusted EBITDA
$
954.4
19.5
%
$
809.1
18.5
%
*Represents a non-GAAP measure, refer to
pages 5-7 in the Earnings Release for definitions.
(a) Other within Americas includes a $0.2
million acquisition inventory step-up and backlog amortization in
2023. Other within Americas includes a $25 million insurance
settlement on a property claim in Q3 2022 and a $0.7 million
non-cash adjustment for contingent consideration in 2022.
(b) Depreciation and amortization within
Americas excludes $0.3 million of acquisition backlog amortization
which has been accounted for in the Restructuring/Other line in
2023.
(c) Other within Europe includes a $8.2
million acquisition inventory step-up and backlog amortization in
2023.
(d) Depreciation and amortization within
Europe excludes $6.5 million of acquisition backlog amortization
which has been accounted for in the Restructuring/Other line in
2023.
(e) Other within Corporate includes $1.1
million of transformation costs and $3.2 million of M&A
transaction costs in 2023. Other within Corporate includes $1.8
million of M&A transaction costs, a $0.8 million settlement
charge for a retired executive, and $0.6 million of transformation
costs in 2022.
(f) Other income/ (expense), net within
Corporate excludes a $15.0 million settlement charge for a retired
executive in 2022.
Table 5
TRANE TECHNOLOGIES PLC
Reconciliation of GAAP to
non-GAAP
(In millions)
UNAUDITED
For the quarter
ended September 30,
2023
2022
Total Company
Adjusted EBITDA *
$
954.4
$
809.1
Less: items to reconcile adjusted EBITDA
to net earnings attributable to Trane Technologies plc
Depreciation and amortization(1)
(85.2
)
(84.0
)
Interest expense
(57.9
)
(55.8
)
Provision for income taxes
(157.5
)
(104.7
)
Restructuring costs
(2.3
)
(10.4
)
Transformation costs
(1.1
)
(0.6
)
M&A transaction costs
(3.2
)
(1.8
)
Acquisition inventory step-up and backlog
amortization
(8.4
)
—
Non-cash adjustment for contingent
consideration
—
(0.7
)
Insurance settlement on a property claim
in Q3 2022
—
25.0
Settlement charge for retired
executive
—
(15.8
)
Discontinued operations, net of tax
(6.5
)
(7.9
)
Net earnings from continuing operations
attributable to noncontrolling interests
(6.0
)
(4.5
)
Net earnings attributable to Trane
Technologies plc
$
626.3
$
547.9
(1) Depreciation and amortization excludes
acquisition backlog amortization of $6.8 million which has been
included in the acquisition inventory step-up and backlog
amortization line in 2023
*Represents a non-GAAP measure, refer to
pages 5-7 in the Earnings Release for definitions.
Table 6
TRANE TECHNOLOGIES PLC
Condensed Consolidated Balance
Sheets
(In millions)
UNAUDITED
September 30,
December 31,
2023
2022
ASSETS
Cash and cash equivalents
$
960.0
$
1,220.5
Accounts and notes receivable, net
3,142.5
2,780.1
Inventories
2,191.8
1,993.8
Other current assets
432.6
384.8
Total current assets
6,726.9
6,379.2
Property, plant and equipment, net
1,683.8
1,536.1
Goodwill
5,719.1
5,503.7
Intangible assets, net
3,337.7
3,264.0
Other noncurrent assets
1,435.7
1,398.6
Total assets
$
18,903.2
$
18,081.6
LIABILITIES AND EQUITY
Accounts payable
$
2,093.3
$
2,091.6
Accrued expenses and other current
liabilities
2,772.6
2,547.2
Short-term borrowings and current
maturities of long-term debt
348.3
1,048.0
Total current liabilities
5,214.2
5,686.8
Long-term debt
4,476.3
3,788.3
Other noncurrent liabilities
2,512.3
2,501.3
Shareholders' Equity
6,700.4
6,105.2
Total liabilities and equity
$
18,903.2
$
18,081.6
Table 7
TRANE TECHNOLOGIES PLC
Condensed Consolidated
Statement of Cash Flows
(In millions)
UNAUDITED
For the nine months
ended September 30,
2023
2022
Operating Activities
Earnings from continuing operations
$
1,552.3
$
1,347.3
Depreciation and amortization
260.2
241.0
Changes in assets and liabilities and
other non-cash items
(329.9
)
(654.9
)
Net cash provided by (used in) continuing
operating activities
1,482.6
933.4
Net cash provided by (used in)
discontinued operating activities
(27.8
)
(189.7
)
Net cash provided by (used in) operating
activities
1,454.8
743.7
Investing Activities
Capital expenditures, net
(217.2
)
(202.8
)
Acquisition of businesses, net of cash
acquired
(510.2
)
(109.6
)
Other investing activities, net
(8.7
)
(12.8
)
Net cash provided by (used in) continuing
investing activities
(736.1
)
(325.2
)
Net cash provided by (used in)
discontinued investing activities
—
(0.6
)
Net cash provided by (used in) investing
activities
(736.1
)
(325.8
)
Financing Activities
Net proceeds from (payments of) debt
(11.6
)
(7.5
)
Dividends paid to ordinary
shareholders
(513.0
)
(467.0
)
Repurchase of ordinary shares
(459.8
)
(900.1
)
Receipt of / (Settlement related to)
special cash payment
—
(6.2
)
Other financing activities, net
32.3
(32.2
)
Net cash provided by (used in) financing
activities
(952.1
)
(1,413.0
)
Effect of exchange rate changes on cash
and cash equivalents
(27.1
)
(83.9
)
Net increase (decrease) in cash and cash
equivalents
(260.5
)
(1,079.0
)
Cash and cash equivalents - beginning of
period
1,220.5
2,159.2
Cash and cash equivalents - end of
period
$
960.0
$
1,080.2
Table 8
TRANE TECHNOLOGIES PLC
Balance Sheet Metrics and Free
Cash Flow
($ in millions)
UNAUDITED
September 30,
September 30,
December 31,
2023
2022
2022
Net Receivables
$
3,142.5
$
2,867.4
$
2,780.1
Days Sales Outstanding
58.7
59.8
62.3
Net Inventory
$
2,191.8
$
1,949.2
$
1,993.8
Inventory Turns
5.9
6.1
5.7
Accounts Payable
$
2,093.3
$
2,061.3
$
2,091.6
Days Payable Outstanding
59.2
63.5
66.9
-------------------------------------------------------------------------------------------------------------------------------------------------------
Nine months ended
Nine months ended
September 30, 2023
September 30, 2022
Net cash flow provided by continuing
operating activities
$
1,482.6
$
933.4
Capital expenditures
(217.2
)
(202.8
)
Cash payments for restructuring
8.8
20.4
Transformation costs paid
3.5
8.9
M&A transaction costs
10.7
—
QSF funding (continuing operations
component)1
—
91.8
Compensation related payment to a retired
executive
—
64.3
Insurance settlement on a property claim
in Q3 2022
—
(25.0
)
Free cash flow *
$
1,288.4
$
891.0
1 On March 2, 2022, the Company funded
$270.0 million to the qualified settlement fund (QSF), of which
$91.8 million was allocated to continuing operations and $178.2
million was allocated to discontinued operations
*Represents a non-GAAP measure, refer to
pages 5-7 in the Earnings Release for definitions.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231101590132/en/
Media: Shelby Hansen 925-336-0496
shelby.hansen@tranetechnologies.com
Investors: Zac Nagle 704-990-3913
InvestorRelations@tranetechnologies.com
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